| | |  Business News | October 2009 
Mexico's Factories Rehire but Recovery Still Weak
 Robin Emmott - Reuters
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October 30, 2009
Monterrey, Mexico - Mexican factories on the U.S. border are rehiring following sweeping layoffs as the country pulls out of its worst recession since the 1930s, but plant managers say a strong rebound is still far off.
Mexico's assembly-for-export factories, or maquiladoras, sell everything from computers to aircraft parts, but U.S. demand has plummeted since January and factories with goods like televisions, which come off production lines every minute, have slashed work hours or stopped altogether.
Companies fired 105,000 workers between October and July and 100 factories closed, according to the National Maquiladora Council, an industry group that promotes the sector.
But Mexican plants run by U.S. companies like world No. 1 appliances maker Whirlpool (WHR.N: Quote, Profile, Research, Stock Buzz) have hired 9,000 workers since August as the weak Mexican peso makes exports more competitive and orders trickle in again, the council says.
"We had a good month in September and I think companies generally are starting to stabilize a little," said Carlos Gomez, plant manager at U.S. thermoplastics maker Aurora Technologies Inc in Monterrey.
"I hope next year we'll see a recovery but it is hard to say when," Gomez said, as automated drills cut red fiberglass sheets outside his office to fill a new client order.
Steadying output from maquiladoras, which generated more than $120 billion in income for Mexico in 2007, is a sign of the improving health of the U.S. and Mexican economies.
But a surprise drop in U.S. consumer confidence in October bodes poorly for a quick recovery in Mexico's export sector.
Mexico's economy will likely shrink at its fastest pace this year since 1932. Mexico's central bank expects an economic decline of between 6 percent and 7 percent this year, though it expects that growth resumed in the third quarter.
MEXICO STILL ATTRACTIVE
From Tijuana near San Diego to Reynosa on the Texan border, maquiladoras and suppliers to major U.S. companies say they have ended work stoppages, but few managers are optimistic about returning to 2007 production levels quickly.
"There's lots of quotation work about as people are looking to save costs but no sign yet of a big rise in demand," said Rosalinda Moreno, head of quality at Monterrey-based MexCo, which supplies counterweights for Whirlpool washing machines.
Plant managers are looking for a revival in U.S. consumer spending to lift sales but in the meantime, many factories are looking to get by with a minimum level of staffing.
"The 20 percent fall in the U.S. market is a reality in Tijuana because you can't make what people aren't buying," said Javier Martinez, head of the Tijuana maquiladora association.
Maquiladoras, which import materials and gear tax-free for assembly and re-export, are still a key long-term sector for Mexico. Low labor costs can save foreign firms up to 30 percent compared to running the same plant in the United States.
Better protection of intellectual property rights compared to China and proximity to the United States are also a draw.
Aurora Technologies opened its first Mexican plant in July 2008 with a $1.5 million investment and although the Monterrey factory is running at about 20 percent capacity, it hopes to eventually generate $2 million in annual sales.
Aerospace companies including Textron Inc's (TXT.N: Quote, Profile, Research, Stock Buzz) Cessna unit are increasing work in Chihuahua state near Texas and China's Lenovo (0992.HK: Quote, Profile, Research, Stock Buzz), the world's fourth-biggest personal computer maker, recently opened a plant in Monterrey.
"We are moving ahead slowly," said Soledad Maynez, head of the maquiladora association in Ciudad Juarez. "We've got four new companies setting up for the first quarter of 2010 that hired 1,200 people this year and will add another 1,800."
(Additional reporting by Lizbeth Diaz in Tijuana and Julian Cardona in Ciudad Juarez; Editing by Kenneth Barry)
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